Is the Appen Ltd (ASX: APX) share price an opportunity after the ASX tech share's hefty decline in 2021 in the year to date?
Appen shares have dropped by around 50% since the start of this calendar year.
Over the last 12 months it has been one of the worst performers in the S&P/ASX 200 Index (ASX: XJO).
But with the artificial intelligence and machine learning business dropping so much, do analysts think the stock is good value?
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What has it recently announced?
In the second half of FY20, Appen said that growth moderated due to the strong Australian dollar and COVID-19 impacts.
There were three things that Appen referred to with those COVID-19 impacts. There was the impact of lower digital advertising revenue and an uncertain outlook on consumer spending. Next, there was the deferral and reprioritisation of projects. The third thing was restricted face to face sales and customer engagement.
Appen is currently going through a restructuring that will focus on the needs of different customer groups and markets, and to enable the development of differentiated approaches to sales, customer experience and delivery models. A new leadership structure will come with profit and loss responsibility that will increase visibility of, and accountability for, performance across its business units.
There will be restructuring costs, but annualised gross savings are expected to be US$15 million from 2022.
In a May trading update, the company said its year to date revenue plus orders in hand for delivery in FY21 was approximately US$260 million at the end of April 2021.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ending 31 December 2021 is expected to be in the range of US$83 million to US$90 million.
Is the Appen share price an opportunity?
Both Macquarie Group Ltd (ASX: MQG) and Credit Suisse have neutral ratings on Appen. The Credit Suisse price target is $15 and the Macquarie price target is $14.70.
Both of the above brokers think that the market may too positive with earnings expectations.
One of those with a more positive outlook is Ord Minnett which has a price target on Appen of $24.75 which suggests the Appen share price could almost double over the next 12 months, if Ord Minnett is right. The broker thought the May trading update was reassuring and that the restructuring was a positive because of the expected lower costs.
On Ord Minnett's numbers, the Appen share price is valued at 22x FY21's estimated earnings.
But the broker Macquarie thinks that Appen shares are valued at 30x FY21's estimated earnings.
